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1071 Proposal Reasonably Designed Video Transcript:
All right. This is a big deal, I think. As you go about collecting information, you’re going to be required to make these requests along the way for the data that’s going to be reported. And the request and how you go about it work like this. There’s this time and manner that you must satisfy when it comes to data collection, and it’s in a time and manner that’s reasonably designed to get a response. So, in E1a, they’re going to say you get flexibility in creating these procedures that you’re going to go about collecting information and doing so in a time and manner that ultimately results in a response from the applicant. And they’re going even to give you some examples of procedures designed to reasonably obtain a response, and it talks about B1, timing. At the time of application, I’m saying early in the application process.
Now, I’ll throw that out there as well, at the time of application, early in the application process, on or with other documents, and we’ll sort that out later. So, let me do this before we go on. Does it have to be at the time of application? No.
Those of you who are on the banks know that you must collect certain things at the time of application. Those of you that don’t have to do HMDA, but you follow Regulation B, you know there are certain things you must do at the time of application. All of you must do intend to apply. That’s at the time of application.
This rule is different.
This rule says that once you have an application, you must go about collecting this information that we’re going to go through at a time and in a manner that’s reasonably designed to collect a response. Still, it’s not necessarily at the time of application. Early in the application process is your encouragement or a recommendation on or with other documents.
I’m going to share with you later the model forms for collecting women in minority-owned status and race, ethnicity, and sex. I will tell you that information must be separate from all other information you request. It cannot be in the same form. It’s got to be its form, and I’m going to encourage you to use the model form for that. You can collect at the same time as collecting that information, but you cannot collect all that information on the same form. And that’s what Roman rule number two is getting at there. You go to page number 12; they also get into what is not reasonably designed to obtain a response. If I’m sitting down with the applicant, let’s say Diane is my business applicant. We’re sitting down talking about her small business, and I’m collecting some information. And I say, “Well, why don’t you skip over on that? We’ll come back to that later.”
If that’s part of your process, or we interview loan officers and find out that’s what they’re doing, then it says that’s not a process that’s reasonably designed to obtain a response. Roman rule number two says with or after notification of action taken. “Hey, Diane. By the way, we’re not going to do that business purpose loan that you were requesting for your small business, but we need some information from you.” Well, that’s not; I mean, she’s going to hang up the phone. She’s not going to provide me something if I’m turning her down and telling her no. That’s not designed to obtain a response reasonably. And then Roman rule number three says if I’m asking Diane to apply online, “Why don’t you go out and fill out this online information?” But then I request the data for reporting by mail.
I want her to apply electronically, so I have her in the system, but I don’t request the reportable data by the same method. I’m going to mail out something to her. I’ll try to visit with her when she comes in for the rest of the data. That’s not in a consistent manner, the request for information, as opposed to the application information. Here’s the thing, these procedures that you’re going to be asked to implement to ensure that you are collecting information at a time that’s designed to be designed to obtain a response reasonably, there’s a built-in assessment or a check.
Jerod is the leader of Banker’s Compliance Consulting’s training productions. He is a nationally recognized speaker. Whether it’s a conference, seminar, school, webinar, or luncheon, it’s easy to stay engaged when he presents due to the amount of passion and energy he brings to each and every compliance topic. Jerod has spoken on behalf of the American Bankers’ Association, BankersOnline, many state banking associations, private compliance groups, and financial institutions. He is a Certified Regulatory Compliance Manager (CRCM) and BankersOnline Guru.
Jerod likes to spend his time (between reading regulations and producing compliance training!) relaxing at the lake with his wife and three children, following their activities or engaged in something sports related!